Chapter 1
the knowledge and skill base necessary for people to be informed consumers and manage their finances effectively
What is financial literacy
anything that is owned by an individual, including money in the bank or investments
What is an asset
a written plan for giving, saving, and spending
What is a budget
expense that remains the same from month to month
What is a fixed-expense
money received for work, as a gift, or through investment
What is income
a person or organization that uses a product or service
What is a consumer
financial debts or obligations
What is a liability
a cash-flow plan that assigns an expense to every dollar of your income; the goal is for the total income minus the total expenses to equal zero
What is a Zero-based budget
expense that varies in dollar amount from month to month, but that you can expect to have every month
What is a variable expense
the amount you earn before taxes and other payroll deductions
What is gross income
the additional cost a lender charges for borrowing their money
What is interest
the cost of goods or services; money paid out
What is an expense
a record that summarizes all of the income and outgo (spending) over a certain time period
What is a cash flow statement
expense for things you don’t need
What is Discretionary (Nonessential) Expense
what a person earns after payroll taxes and other deductions are taken out; often referred to as take-home pay
What is net income
the amount by which the value of a person’s assets exceeds or falls behind the value of their liabilities
What is net worth
the additional cost a lender charges for borrowing their money
What is Interest
earnings based on a percentage of the sales made
What is Commission
expense that occurs at various times throughout the year and tends to be in large, lump sums
What is an Intermittent Expense
income that comes in at different amounts or at different times, or both
What is irregular income
all the financial decisions an individual or family must make in order to earn, budget, save, spend, and give money over time
What is personal finance
a plan of action that allows a person to meet not only their immediate needs but also their long-term goals
What is a financial plan
A method of budgeting that uses envelopes labeled with specific budget categories for your cash.
What is the envelope system
a record that summarizes all of the income and outgo (spending) over a certain time period
What is cash flow statement